Autotechinsider January Feb Newsletter

1. AUTOTECHINSIDER, AutoTechInsider
Newsletter for client use
LLC
JANUARY—
FEBRUARY ISSUE
V O L U M E I , I S S U E 2 V O L U M E I , I S S U E 2
Count Down to Consumer Electronics Show 2010
Las Vegas, January 7-10th
INSIDE THIS Now is the time to get excited and prepare for the
ISSUE:
Consumer Electronics Show this week. Many of us
follow CES intently, and AutoTechInsider will be
there walking the show and preparing our detailed
Countdown to 1 report. What should we look forward to seeing and
2010 Consumer learning – here are a few thought starters:
Electronics Show - eBook readers everywhere, some expect
Sources of info 1 Apple to introduce a net book/tablet as a
on CES color magazine reader
- 3D TV again, shown in 2009, this time
affordable, but possibly not hassle proof?
Technologies for 2 - An expanded GreenTech area for a “Sustainable Planet” (see page 2) – what will
a Sustainable
Planet
customers find practical and affordable?
- Health and Wellness products/technologies (see page 2)
Digital Health 2 - Cloud computing for enterprise/IT applications
and Wellness - Wireless HDMI and wireless HDTV
Products - Many mobile innovations as applicable to the car, such as wireless charging, appli-
The Auto 3 cation stores for mobile/auto and WiFi in the car
Industry in 2010
Steve Ballmer will again provide the show with a keynote, but the introduction of Windows
7 last year will be a hard act to follow. All eyes will be on the Ford CEO Alan Mulally who
Who is 4 will deliver the opening keynote address. He will no doubt introduce several new SYNC
AutoTechInsider
innovations and technology partners. Ford is an innovator and darling of the auto indus-
try. AutoTechInsider will follow and showcase these developments in our 2010 CES
report which we provide to our customers for the price of $349.
Please visit our website to purchase your 2010 CES report and obtain our 2009 CES,
Ford SYNC and SEMA reports for free!! We think you will agree this is a value! The recov-
ery is underway in 2010 (see page 4), but these are still difficult times and AutoTechIn-
sider LLC is fortunate to be able to provide this service to our clients.
Sources of Information about CES
AutoTechInsider LLC— www. autotechinsider.com Ford SYNC and SEMA reports available
CNET— http://ces.cnet.com/8300-31045_1-269-0.html?tag=mncol, http://
PC Magazine— www.pcmag.com/article2/0,2817,2357523,00.asp
Version 1.2 Engadget— www.engadget/2009/12/30/engadget-the-official-blog-partner-of-ces-2010/
Ford Media— http://media.ford.com/article_display.cfm?article_id=31053
CES Website— www.cesweb.org

2. P AGE 2
Technologies at CES for a Sustainable Planet
Green technologies and renewable energy are the wave of the future, and CES is one of the key events for
the introduction of new consumer products and technologies. The bulk of the “green” technology exhibits at
CES 2009 focused on energy efficient appliances and solar power. In particular, LG had a large display that
highlighted washers, dryers, TVs and BlueRay players. The Greener Gadgets section at CES 2010 will in-
clude LED lighting solutions, power saving technologies, products that incorporate solar power, new battery
solutions, and green battery changers.
CES 2010 will also include a greatly anticipated panel discussion on smart grids. This technology area is
one of the most exciting and one we will be watching with great interest. The expectation is that utility compa-
nies and their partners will be adding Smart Grid capabilities to enhance the efficiency of current distribution
systems and to accommodate new alternative energy sources. Consumers will benefit from reduced energy
bills and the assurance of a smaller carbon footprint.
draft
Digital Health and Wellness Products/Technologies
Health and Wellness exhibitors at CES 2009 primarily showed products that enabled or supported health main-
tenance or rehabilitation. Exhibitors like Halo, Clearsounds and Dynaflex showed products that assist Alz-
heimer’s patients, senior citizens, and others who can benefit from vitals monitoring, brain “exercise”, hearing
assistance, and physical therapy.
The currently registered exhibitors for CES 2010 do not include many that were present last year and their
products are more focused on communications, health monitoring, addition recovery, and massage.
Over the course of the last year or two, we have seen a number of companies like Nike and Intel introduce new
digital products in the Health & Wellness space. One of the more interesting new product lines was the Nike
Plus line developed in partnership with Apple. The running shoes and Sport band bracelets are equipped with
a sensor that records data and facilitates its download to an iPhone or PC.
We are looking forward to seeing the new Health & Wellness products that will be introduced at CES 2010 and
will include an overview of these in our upcoming CES report
NIKE SPORT BAND
DYNAFLEX
AUT OT ECHINSIDER

3. The Auto Industry in 2010
P AGE 3
A Challenging But Brighter Road Ahead
This is the time of year for New Year resolutions, but more impor-
tantly thinking and reflecting on what opportunities and challenges
are ahead. Many of us are naturally optimistic and think 2010 has to
be a better year for our North American (NA) auto industry. Optimism
burns eternal and we all feel as the tsunami has come and gone.
But will the winds of misfortune blow again? Should we expect a mid
-course correction, a further loss of market share, profits and jobs
from new supplier defaults? Before addressing these important
questions, we need to consider the extent of the crisis - how bad was
it really? How far have we fallen from the peak of 17M light vehicle
sales in 2007? Where have we come from and what is the road of
recovery ahead?
Center for Automotive Research Provides Insights
Fortunately we have an excellent industry resource in the Center for Automotive Research
(www.cargroup.org) to help answer our questions. CAR is a leading source of all data relative to the automo-
tive industry. I recently, I had the good fortune of attending a December seminar, entitled “Picking Up the
Pieces: The Forecast for 2010” with presentations from:
Sean McAlinden, Ph.D., Exec. VP, Research and Chief Economist, Center for Automotive Research
Dave Andrea, VP, Industry Analysis and Economics, Original Equipment Suppliers Association
Michael Robinet, Vice President, Global Vehicle Forecast Services, CSM Worldwide, Inc.
I highly recommend a visit to the CAR website, where the presentations are available to download in PDF
form. The purpose of this article is to provide the key take aways and to summarize a very insightful question
and answer period. We should expect a very volatile and challenging year – not the steady improvement
since the low of the S&P in March of 2009, a 54% improvement in wealth with only a few corrections.
One take away was that the situation in 2008 was indeed a crisis of epic proportions and that some form of
intervention was needed!! We just experienced the lowest car sales of 10M since 1970! There are a lot of fac-
tors that caused the crisis, internal and external, but manufacturing capacity of the big three has declined
from a recent high in 2002 of 73% to a low of 40% in the first quarter of 2008. There is some improvement in
the second quarter, as we have currently increased to 48%. More importantly profits from a high in 2005 have
decreased by 54% to an all time low in 2009. As we can all see as we look around us, US employment has
decreased from a high of 1.13M in 2000 to a low of 562,000 in 2009. A key observation is that in our NA in-
dustry all key metrics were cut in half from our 2007 peak – capacity, profits and importantly employment
Good News GM and Chrysler Still With Us and Ford Growing
The “good news” according to CAR and I think most of us will agree is that a NA auto industry exists! GM and
Chrysler are still with us and have merged from bankruptcy in record time. What is the future of a “Big Three”
NA industry or rather is our NA industry a “Big Two”, a “right-sized” market consisting of Ford and GM with
reallocated pieces of Chrysler? Will 2010 see Fiat intervene in time to save Chrysler? GM has an adequate
pipeline of new product starting next year and Ford is our darling. Fiat holds some promise” for Chrysler, but
time is short especially if the 2010 economy is problematic (sub 2.5% GNP growth).
AUT OT ECHINSIDER

4. NA Supply Base Hibernating — Waiting for a 2010 Recovery P AGE 4
What is the future hold for suppliers? The majority of NA auto suppliers in the meantime have weathered the
storm and have effectively “hibernated”. Hibernated in that the have throttled down production, laid off work-
ers, etc., but haven’t liquidated key assets, namely factories. To put the year into perspective, there were
fourteen supplier bankruptcies in 2009 out of the top 150 NA suppliers. Good news is the supply base didn’t
collapse! Note at least 40 additional major supplier bankruptcies have occurred outside the top 150. Our NA
supply base has now an upper and lower class, many weak suppliers have hibernated, but a segment of sup-
pliers are much stronger as they have:
- reduced overhead structures,
- face less competition,
- established global marketing and purchasing capability,
- deleveraged balance sheets,
- have new sources of capital from diverse parties – private equity, foreign firms, etc.,
- created new partnerships and consortia with industry, government and academia, etc,
- and lastly have efficient and disciplined real-time costing and pricing processes
Will the Recovery Continue — Be ”Cautiously Optimistic” ?
To answer the question – will the recover continue? A key signpost is the re-emergence of the US Consumer.
A “recession can’t last forever”, but it can be a relatively flat and lengthy recovery. A steady recovery as-
sumes a pent up demand for cars and fuel prices that stay reasonable. The auto industry needs 3.0% plus
growth and re-bounded consumer confidence to meet the more aggressive vehicle CAR sales targets of
12.4M. These are the sign posts to watch in the first quarter. CAR provided a very credible predication of US
Light Vehicle sales as 12.4M in 2010 increasing to 13.9M in 2011. Finally approaching 2007 levels in 2014
with 15.7M sales, i.e. returning to the historical 1976 – 2020 trend line and 2007 production levels in 2014-15.
This author is “cautiously optimistic”. Better stated, we need to see the signs of a recovery continue unen-
cumbered. A very possible scenario in 2010 is a stalled recovery around the second quarter due to a shell
shocked US consumer, inflation with the Fed raising interest rates, the stimulus losing its impact, higher gaso-
line costs, additional bank and supplier bankruptcies, a commercial real estate crash, and adverse geo-
political events (always an unpredictable wild card). A combination of these negative factors can stall the
“recovery” or cause a best a “sideways” movement. This is what CAR calls the ugly “L” recovery in 2010 of
11.5M to 12.4M light vehicle sales.
In conclusion, let’s be optimistic but plan for a volatile 2010 and a few years of uncertain growth before we
regain 2007 sales and profit levels in the 2013-14 time frame. Employment I expect will never approach 2007
levels in the foreseeable future. In the interim automakers – Ford, Toyota, Honda, Hyundai, and possibly Tata
Motors, new Chinese manufacturers, etc. will emerge as the players to potentially provide new business/
employment opportunities. The emerging auto companies will co-locate to NA to address currency issues,
achieve cost stability, manufacturing efficiency, and to quickly react to customers and governments. Ford and
GM will have established a stable and profitable business – the probable outlook is a “Big Two” NA auto in-
dustry with a thriving Ford. The boom and bust market of 1976-2007 driven by easy money and the US con-
sumer is gone. Study the Western Europe auto market for an idea of what we are becoming – competition
replaced by a market that is protected by government “policy”.
The automobile industry is profoundly affected by adjacent industries that pro-
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duce the technologies that are involved, directly or indirectly, in the production
Visit us at www.autotechinsider.com
of a vehicle. Since the percentage of a given vehicle's cost related to
The Authors: electronics, software, networking solutions, and related services continues to
grow, we are most interested in these technology areas. Based own our exten-
Dave McNamara, MTS LLC sive experience in the automotive industry, we cover major events and produce
dmcnamara@autotechinsider.com insightful reports on the technologies, the companies, and the trends that we
believe will have a significant impact in the near future.
Craig Simonds, AutoTechInsider LLC
Disclaimers—All information gathering was done in compliance with the ethical standards of the Society of
csimonds@autotechinsider.com
Competitive Intelligence Professionals and within the provisions of the US Economic Espionage Act of 1996.